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A Futile Run after Fugitives

The Fugitive Economic Offenders Act is a pointless anti-corruption exercise.

Amidst the nationwide furore created by the Vijay Mallya, Nirav Modi and Mehul Choksi debacles, the National Democratic Alliance government has brought in a new piece of legislation—the Fugitive Economic Offenders Act (FEOA), 2018 on 31 July 2018—to bring back perpetrators who skedaddle to overseas jurisdictions and evade Indian legal processes, as also to save face in an election year. Though the government is high on rhetoric regarding the deterrent value of this new regulation, especially the provision of non-conviction-based asset confiscation, its feasibility is elusive.

The legislation in its deterrent effect is not only ineffectual, but it can also be constitutionally challenged, particularly its provision of discretionary powers to the judiciary, in order to disentitle an accused from defending any civil claims in civil proceedings, which threatens the basic principles of natural justice. However, the most disconcerting issue is that the basic tenets behind such law-giving are flawed.

A plethora of regulations are already in use to combat fugitive economic crimes in India. Then, what legislative vacuum, per se, is the FEOA endeavouring to fill? According to the Department of Legal Affairs, the existing laws on economic offences (such as the Prevention of Money Laundering Act, 2002, among others) provide for confiscation as a punishment for the offence committed, but no deterrence against absconding from Indian jurisdiction for the
accused, and that the FEOA will address this gap. However, it is not clear how. Being an ex post facto regulation, FEOA cannot resolve the ongoing fiascos, which took place before the new act came into being. However, whether it can at all resolve any case, even in the future, is doubtful, given the strong political clout that absconding perpetrators, àla the Modis and the Mallyas, enjoy. To assume that the threat of aggressive confiscation of the proceeds of the crime alone will be enough to coerce them to surrender to the Indian law is simply a naivety.

Time and again, various governments in this country have resorted to this game of lawmaking to shroud their partisan motives. Laws are used as signals of the government’s good intent, particularly to the poor who predominate the vote bank. Parallelly, the rules for enforcing such laws are twisted in the interest of the big business houses, who are the major benefactors of political parties. Recall that it is the connivance between the Ministry of External Affairs and the government investigation agencies that has led to the adjourning of legal processes in the Nirav Modi case by stalling his extraction. Whereas, in the Vijay Mallya case, the dissuasion has not been the confiscation so much as the realisation of the proceeds of the crime, with no bidders showing up when the confiscated assets were put for auction. The FEOA has no instruments to deal with such systemic stalemates. It is just another addition to the silo of anti-corruption laws in this country, attempting to divert public gaze from the government’s own role in creating the conditions that have failed to check such wrongdoing in the first place.

The unpaid arrears of the fugitives are part of a larger problem of non-performing assets faced by the public sector banks. Policy responses to this crisis have been lethargic. The staggering volume of bad debts amassed by the major public sector banks can no longer be dismissed as a short-run phenomenon. This speaks volumes of how governments have been using their shareholder rights capriciously in influencing the appointments of senior executives and board members, or in rationing out capital allocation in the name of fostering efficiency. Further, these actions impinge on the Reserve Bank of India’s (RBI) regulatory regime, with politically appointed senior banking officials aligning with the government of the day in contravention of the RBI’s regulatory framework. Faced with staunch criticism of such mass mismanagement of public money in the wake of the 2019 elections, the current government is valiantly trying to camouflage the policy impasse by passing two legislations in quick succession: the Banking Regulation (Amendment) Ordinance passed in May 2018 aimed at expediting banks’ recovery of unpaid loans, and then the FEOA just two months later in July 2018. Both of these bear little coherence and relevance vis-à-vis the structural transformation of the banking and financial systems in the country.

The current financial corruption cannot be reduced to a momentary creation of any singular ruling government; it is more so a legacy of the neo-liberal polity of the liberalisation era. With deregulation and liberalisation, the state has assumed a different role in the process of promoting private sector–led growth. Unhindered access to scarce public resources has been provided to private business houses, and state policies are frequently interspersed with private interests. Several evidences reveal that such pro-business strategies of governments have increased corruption by encouraging a state-engineered redistribution of wealth in favour of a few, and at the cost of many. Anti-corruption strategies without any consideration of these socio-economic–cultural linkages will not be able to prevent this endemic and deep-seated disorder.

As of now, anti-corruption campaigns in India dwell heavily on moral outrage. The incumbent government’s knee-jerk legislations are in tandem with this approach. While this moralistic approach can heighten public awareness on corruption, it fails to attain the lofty objectives that the campaigners set themselves out for and, therefore, cannot sustain beyond the initial hysteria.

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